This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Ways To Assess Fear In the Market

Stocks in this article: FXY SHY GLD

Investors had to be encouraged by the preholiday rally in U.S. equities last week. The Dow had moved into positive territory on the year. The S&P 500 had catapulted 5.6% higher off an intraweek low. And the CBOE Volatility Index (VIX) had dropped below a 50-day moving average.

Taking it one step further, the VIX has hit "lower highs" in every consecutive month since May. This additional bit of data is evidence fear may be slowly subsiding.

On the flip side, the fear of allocating to U.S. stocks can't be addressed by the VIX alone. Here are three reasons to think thrice about developed market stocks:

1. CurrencyShares Yen Trust (FXY) Investor willingness to sell/short/borrow the low-yielding yen to invest in higher-yielding assets (for instance, high yield bonds, higher-yielding currencies or stocks) -- a practice frequently referred to as the "yen carry trade" -- is yet another method for assessing fear. If the yen is losing ground, investors are probably confident. If the yen is appreciating in value, investors are probably scared.

On Jan. 7, the yen hit a 15-year high against the dollar during intraday trading. It follows that as long as FXY is winning, investors in U.S. stocks may be timid.

2. iShares 1-3 year Treasury Bond (SHY) Demand for short-term treasury bonds is another dagger in the heart of equities. On Tuesday's auction of three-year Treasury notes, the high yield of 0.79% set a record low. The consistent price appreciation for SHY is not easily dismissed by diversification models or increases in total AUM for the ETF industry; rather, it's one more sign that principal conservation is still in season.

3. SPDR Gold Trust (GLD) Every time the media dismisses the yellow metal, they get it wrong. Writers keep using the word "bubble" to describe a precious metal that does far more than protect against inflation. Gold hedges against sovereign debt default, currency crises, dollar devaluation and fear itself. Not to forget that China and India love the stuff.

I've been advocating gold at every significant pullback over the past 12 months, whether stock assets were heading higher or lower. With stocks below 200-day moving averages, however, and with gold settling at yet another all-time high, exchange-traded vehicles such as GLD are clear indications of economic uncertainty/fear of ongoing economic distress.

>To submit a news tip, send an email to: tips@thestreet.com.

RELATED STORIES:



Follow TheStreet.com on Twitter and become a fan on Facebook.

Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs